Role of narrative disclosures in corporate governance and audit pricing: evidence from India

Nitin Dhir and Balwinder Singh

International Journal of Corporate Governance, 2026, vol. 16, issue 2, 149-187

Abstract: Our study aims to explore the complex relationship between narrative disclosures (NDs), particularly the negative tone (TONE) and readability (READ) of annual reports, and its mediating or moderating effect on the corporate governance (CG)-audit fee (FEE) relationship. We measured CG through 39 board as well as audit committee characteristics, while the TONE through the logarithm of negative words and sentences, likewise READ using two established indices: the FOG index (FOG) and the SMOG index (SMOG). The dataset comprises 2,835 firm-year observations of Indian-listed firms from 2015 to 2021. Our study reveals that the TONE and READ of annual reports significantly mediate the magnitude and direction of the relationship between CG and FEE. Furthermore, the TONE of reports also moderates the role of CG in determining FEE, indicating that lower CG quality increases audit risk. This study contributes a distinctive empirical investigation focusing on the interplay between CG, NDs and FEE.

Keywords: corporate governance; audit pricing; negative tone; readability; FOG index; SMOG index; mediation; moderation; India. (search for similar items in EconPapers)
Date: 2026
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